Barclays Bank of Kenya Ltd (NSE: BBK) announced their audited results for the period ended 31st December 2014 on 6th March
Recommendation: HOLD – KES 15.60 (Downside 9.3%)
3.1% Rise in Pre-Tax; 10% Growth on Restructuring Impact
BBK announced 3.1% growth in pretax profits (before exceptional items) to KES 12.29 billion whereas after-tax profits rose by 10.0% to KES 8.38 billion on account of one-off restructuring costs undertaken in 2013. Non-funded income declined by 4% to KES 8.68 billion owing to non-recurring mark-to-market gain back in 2013 in relation to the bank’s equity investment in VISA shares as well as attrition in FX income borne from the stable currency regime that precipitated for much of 2014. Net interest income broadened 4.0% to KES 19.60 billion on the back of a 6% leap in net loans & advances to KES 125.4billion.
Improvement in Cost-to-Income Ratio to 52%; 43% hike in DPS
Operating expenses remained flat at KES16.0 billion as cost-to-income ratio improved to 51.6% from last year’s margin of 52.9% borne from a lower cost base prompted by restructuring costs undertaken in 2013.
The lender announced 43% hike in first final DPS to Kes 1.00 netting a handsome dividend yield of 5.95% (more than double the banking sector’s average of 2.82%), which we expect to fan dividend hunting activities on the counter in the run-up to its book closure date of 30th March 2015.
NPL Ratio at 3.7% as Bad Debt Provisions Rise by 15%
BBK’s loan book expanded by 6.0% to KES 125.4 billion as customer deposits surged 9.0% to KES 164.8 billion as loan-to-deposit ratio stood at 76.1% (FY14). Gross NPL ratio rose to 3.7% from 3.0% last year with loan loss provisions edging up 14.9% to KES 1.4 billion triggered by a lone default in their corporate loan book.
Outlook: Taut Capital Buffers
At 15.7% and 16.0% against the newly implemented minimum capital buffers for core capital and total capital of 10.5% and 14.5% respectively, BBK appears taut with regards to total capital ratio/RWA.
The share has reported a gain of 3.03% YTD (31/12/14 – Kes 16.65).